<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(MARK ONE)

    [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1999

                                       or

    [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


                        COMMISSION FILE NUMBER 000-24289


                        ASYMETRIX LEARNING SYSTEMS, INC.
             (Exact name of registrant as specified in its chapter)


         DELAWARE                                      91-1276003
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)

                 110-110TH AVENUE NE, BELLEVUE, WASHINGTON 98004
               (Address of principal executive offices) (Zip Code)


                                 (425) 462-0501
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes       X               No
      --------                --------

The number of shares outstanding of the issuer's Common Stock, par value $0.01,
as of September 30, 1999 was 14,719,257 shares.

<PAGE>

                        ASYMETRIX LEARNING SYSTEMS, INC.

                                   FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


PART I - FINANCIAL INFORMATION                                                                  PAGE
<S>                                                                                             <C>
Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets as of September 30, 1999 and
         December 31, 1998                                                                        3

         Condensed Consolidated Statements of Operations for the three months and
         nine months ended September 30, 1999 and 1998                                            4

         Condensed Consolidated Statements of Cash Flows for the three months and
         nine months ended September 30, 1999 and 1998                                            5

         Notes to Condensed Consolidated Financial Statements                                     6

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                                   9

Item 3.   Quantitative and Qualitative Disclosures About Market Risk                             18

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                       19

Item 2.  Changes in Securities and Use of Proceeds                                               19

Item 3.  Defaults upon Senior Securities                                                         20

Item 4.  Submission of Matters to a Vote of Securities Holders                                   20

Item 5.  Other Information                                                                       20

Item 6.  Exhibits and Reports on Form 8-K                                                        20

SIGNATURES                                                                                       21

EXHIBIT INDEX                                                                                    22
</TABLE>


                                       2
<PAGE>

                        ASYMETRIX LEARNING SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                   September 30,       December 31,
                                                                        1999               1998
                                                                   ------------        -------------
<S>                                                                <C>                 <C>
                                     ASSETS

Current assets:
    Cash and cash equivalents                                       $  14,144           $  21,713
     Accounts receivable, net of allowance for returns and
        doubtful accounts of  $931 and $1,397                          11,223               7,917
    Inventories                                                           336                 370
    Prepaid royalties and licenses                                        178                  66
    Receivables from related companies                                     62                 193
    Other current assets                                                2,786                 998
                                                                   ------------        -------------
             Total current assets                                      28,729              31,257
 Property and equipment, net                                            2,637               2,320
 Goodwill and other intangible assets, net                             10,651               9,917
 Other assets                                                             246                 128
                                                                   ------------        -------------
              Total assets                                          $  42,263           $  43,622
                                                                   ------------        -------------
                                                                   ------------        -------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                               $   2,402           $   1,494
     Accrued liabilities                                                2,620               1,637
     Deferred revenue                                                   1,252               1,401
     Other current liabilities                                          1,679               1,812
                                                                   ------------        -------------
             Total current liabilities                                  7,953               6,344
 Other noncurrent liabilities                                             220                 268
                                                                   ------------        -------------
             Total liabilities                                          8,173               6,612
                                                                   ------------        -------------

Stockholders' equity:
     Common stock                                                         148                 140
     Additional paid-in capital                                       207,086             203,249
     Accumulated deficit                                             (172,301)           (165,522)
     Deferred stock compensation                                         (501)               (580)
     Accumulated other comprehensive loss                                (342)               (277)
                                                                   ------------        -------------
            Total stockholders' equity                                 34,090              37,010
                                                                   ------------        -------------
            Total liabilities and stockholders' equity              $  42,263           $  43,622
                                                                   ------------        -------------
                                                                   ------------        -------------
</TABLE>

      See accompanying notes to Condensed Consolidated Financial Statements


                                       3
<PAGE>

                        ASYMETRIX LEARNING SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                         Three months ended             Nine months ended
                                                                            September 30,                  September 30,
                                                                    -------------------------       -------------------------
                                                                        1999            1998            1999            1998
                                                                    -----------    ----------       ----------     ----------
<S>                                                                 <C>            <C>              <C>            <C>
Revenue:
Product revenue:
   Online learning products                                         $  3,370        $  2,811        $  9,388        $  7,704
   Other products                                                        513           1,683           1,219           3,953
                                                                    -----------    ----------       ----------     ----------
        Total product revenue                                          3,883           4,494          10,607          11,657
Services revenue                                                       5,206           4,635          14,494          14,042
                                                                    -----------    ----------       ----------     ----------
         Total revenue                                                 9,089           9,129          25,101          25,699
                                                                    -----------    ----------       ----------     ----------

Cost of revenue:
Product revenue:
   Online learning products                                              258             231             662             709
   Other products                                                        254             208             512             785
                                                                    -----------    ----------       ----------     ----------
     Total cost of product revenue                                       512             439           1,174           1,494
Services revenue                                                       3,730           3,282          10,497           9,274
                                                                    -----------    ----------       ----------     ----------
    Total cost of revenue                                              4,242           3,721          11,671          10,768
                                                                    -----------    ----------       ----------     ----------

Gross margin                                                           4,847           5,408          13,430          14,931
                                                                    -----------    ----------       ----------     ----------

Operating expenses:
   Research and development                                            1,884           1,568           5,042           4,638
   Sales and marketing                                                 3,873           3,559          11,052          10,620
   General and administrative                                          1,357           1,352           4,013           4,296
   Amortization of goodwill                                              239             213             678             592
                                                                    -----------    ----------       ----------     ----------
       Total operating expenses                                        7,353           6,692          20,785          20,146
                                                                    -----------    ----------       ----------     ----------
Loss from operations                                                  (2,506)         (1,284)         (7,355)         (5,215)
Other income, net                                                        137             281             577           2,447
                                                                    -----------    ----------       ----------     ----------
Net loss                                                              (2,369)         (1,003)         (6,778)         (2,768)
Accretion of redemption value of redeemable common stock                   0               0               0          (1,370)
                                                                    -----------    ----------       ----------     ----------
Net loss attributable to common stockholders                        $ (2,369)       $ (1,003)       $ (6,778)       $ (4,138)
                                                                    -----------    ----------       ----------     ----------
                                                                    -----------    ----------       ----------     ----------

Net loss per share, basic and diluted                               $  (0.16)       $  (0.07)       $  (0.48)       $  (0.43)
                                                                    -----------    ----------       ----------     ----------
                                                                    -----------    ----------       ----------     ----------
Weighted average common shares outstanding, basic and
diluted                                                               14,447          13,565          14,145           9,724
                                                                    -----------    ----------       ----------     ----------
                                                                    -----------    ----------       ----------     ----------
</TABLE>

      See accompanying notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>

                        ASYMETRIX LEARNING SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                                September 30,
                                                                                       -----------------------------
                                                                                           1999               1998
                                                                                       ------------       ----------
<S>                                                                                    <C>                <C>
Cash flows from operating activities:
  Net loss                                                                             $ (6,778)          $ (2,768)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                         1,601              1,244
    Write-off property and equipment                                                          -                  8
    Stock compensation expense                                                               79                250
    Equity in income from Infomodelers, Inc.                                                  -             (2,169)
    Changes in assets and liabilities:
      Accounts receivable                                                                (3,282)                (9)
      Inventories                                                                            34                107
      Prepaid royalties and licenses                                                       (112)               (13)
      Receivables from related companies                                                   (129)               (21)
      Other current assets                                                               (1,786)              (606)
      Accounts payable                                                                      898             (1,121)
      Accrued liabilities                                                                   970               (544)
      Deferred revenue                                                                     (149)            (2,293)
      Other current liabilities                                                            (269)              (928)
                                                                                       ------------       ----------
               Net cash used in operating activities                                     (8,923)            (8,863)
                                                                                       ------------       ----------

Cash flows from investing activities:
    Purchase of property and equipment                                                   (1,707)              (955)
    Payments related to acquisitions, net of cash acquired                                 (126)                45
    Disposal of investment in Infomodelers, Inc.                                              -              2,373
    Disposal (purchase) of other assets                                                    (118)                 3
                                                                                       ------------       ----------
               Net cash (used in)/provided by investing activities                      (1,951)             1,466
                                                                                       ------------       ----------

Cash flows from financing activities:
    Repayment of notes payable                                                              (74)            (1,530)
    Proceeds from exercise of stock options                                                 475                521
    Net proceeds from private placement                                                   2,970                  -
    Net proceeds from initial public offering                                                 -             29,331
                                                                                       ------------       ----------
               Net cash provided by financing activities                                  3,371             28,322
                                                                                       ------------       ----------
    Effect of foreign exchange rate changes                                                 (66)               (75)
                                                                                       ------------       ----------
               Net increase(decrease) in cash and cash equivalents                       (7,569)            20,850
Cash and cash equivalents at beginning of period                                         21,713              2,541
                                                                                       ------------       ----------
Cash and cash equivalents at end of period                                             $ 14,144           $ 23,391
                                                                                       ------------       ----------
                                                                                       ------------       ----------
</TABLE>


      See accompanying notes to Condensed Consolidated Financial Statements


                                       5
<PAGE>

                        ASYMETRIX LEARNING SYSTEMS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1999 AND 1998

UNAUDITED INTERIM FINANCIAL INFORMATION

         The accompanying unaudited condensed consolidated financial statements
of Asymetrix Learning Systems, Inc. ("Asymetrix") include the accounts of
Asymetrix and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. These statements reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial position and results of operations for
the periods presented. These condensed consolidated financial statements and
notes should be read in conjunction with Asymetrix's audited consolidated
financial statements included in Asymetrix's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998. Certain information and footnote
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
Interim results of operations for the three months and nine months ended
September 30, 1999 are not necessarily indicative of the operating results for
the full fiscal year. Factors that may affect such operating results, include,
but are not limited to, those discussed in "FACTORS THAT MAY AFFECT FUTURE
RESULTS OF OPERATIONS".

ACQUISITION

         In July 1999, Asymetrix acquired Pixelmedia Visual Communications, Inc.
("Pixelmedia"), an online learning development firm based in Richmond, British
Columbia. The acquisition of Pixelmedia was accounted for using the purchase
method of accounting. Asymetrix issued 100,000 shares of Common Stock, and paid
approximately $500,000 to acquire all of the issued and outstanding Pixelmedia
capital stock, and to repay debts owed by Pixelmedia to its principal
shareholders.

INVENTORIES

         Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

                                             SEPTEMBER 30,          DECEMBER 31,
                                                 1999                   1998
                                             -------------          ------------
<S>                                          <C>                    <C>
Raw materials                                    $247                   $247
Finished goods                                    154                    226
Less obsolescence reserve                         (65)                  (103)
                                             -------------          ------------
                                                 $336                   $370
                                             -------------          ------------
                                             -------------          ------------
</TABLE>


NET LOSS PER SHARE

         Basic earnings per share is computed by dividing the sum of net loss
plus accretion of redemption value of redeemable common stock by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing the sum of net loss plus accretion of
redemption value of redeemable common stock by the weighted average number of
common and dilutive common equivalent shares outstanding during the period. As
Asymetrix had a net loss attributable to common stockholders in each of the
periods presented, basic and diluted net loss per share is the same.

         Excluded from the computation of diluted earnings per share for the
three and nine months ended September 30, 1999 are options to acquire
approximately 4,344,570 shares of Common Stock with a weighted average exercise
price of $4.90 and warrants to acquire 428,571 shares of Common Stock with an
exercise price of $7.00, and for the three and nine months ended September 30,
1998 are options to acquire approximately 4,097,729 shares of Common Stock
with a weighted average exercise price of $5.03 because their effects would be
anti-dilutive.

                                       6
<PAGE>

REVENUE RECOGNITION

         Asymetrix recognizes revenue in accordance with Statement of Position
97-2, SOFTWARE REVENUE RECOGNITION ("SOP 97-2"), which provides specific
industry guidance and stipulates that revenue recognized from software
arrangements is to be allocated to each element of the arrangement based on the
relative fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installation, or training. Under
SOP 97-2, the determination of fair value is based on objective evidence, which
is specific to the vendor. If such evidence of fair value for each element of
the arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements of
the arrangement are delivered.

         Revenue from sales of software products to end-users, resellers, and
distributors is recognized when the products are delivered provided all the
requirements of SOP 97-2 have been met. Asymetrix's agreements with certain
distributors and resellers permit them to exchange products under certain
circumstances and permit returns from certain resellers subject to specific
limitations. When appropriate, accruals are established for estimated returns
and exchanges. In the case of nonrefundable minimum royalties from an OEM,
reseller or other distributor, if no significant obligations of Asymetrix
remain, Asymetrix recognizes revenue when it delivers its product to the OEM
reseller or other distributor. Additional royalties are paid to the extent that
the advances are exceeded and these additional royalties are recognized upon
delivery of the products by the OEM, reseller or other distributor to its
customers. Asymetrix recognizes revenue associated with technical support
agreements over the life of the contract.

          Asymetrix recognizes revenue under custom development contracts as
services are provided for time and materials contracts or by using the
percentage-of-completion method of accounting, based on the ratio of costs
incurred to the total estimated project cost, for individual fixed-price
contracts. Provisions for any estimated losses on uncompleted contracts are made
in the period in which such losses become evident.

         In December 1998, the AICPA issued Statement of Position 98-9,
"MODIFICATION OF SOP 97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN
TRANSACTIONS" ("SOP 98-9") which amends certain elements of SOP 97-2 and is
effective for fiscal years beginning after March 15, 1999. Asymetrix believes
that the adoption of SOP 98-9 will not have a material effect on results of
operations or financial position.

COMPREHENSIVE INCOME

         Asymetrix has adopted the provisions of Statement of Financial
Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("Statement 130").
Statement 130 establishes revenues for reporting and disclosure of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. The following table sets forth the
components of comprehensive loss for the periods presented below:
<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED               NINE MONTHS ENDED
                                                          SEPTEMBER 30,                   SEPTEMBER 30,
                                                      ------------------------        ------------------------
                                                         1999            1998            1999            1998
                                                      --------        -------         -------         -------
<S>                                                   <C>             <C>             <C>             <C>
Net loss                                              $(2,369)        $(1,003)        $(6,778)        $(2,768)
Foreign currency translation  adjustment                   49             (40)            (65)            (74)
                                                      --------        -------         -------         -------
Total comprehensive loss                              $(2,320)        $(1,043)        $(6,843)        $(2,842)
                                                      --------        -------         -------         -------
                                                      --------        -------         -------         -------
</TABLE>


                                       7
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

         In March 1998, the Accounting Standards Executive Committee issued
Statement of Position No. 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"). SOP 98-1 established
guidance on accounting for the costs incurred related to internal used software.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998.
Asymetrix adopted SOP 98-1 effective January 1, 1999. Adoption of SOP 98-1 did
not have a material impact on the consolidated financial statements.

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES ("Statement 133"). Statement 133 provides a comprehensive
and consistent standard for the recognition and measurement of derivatives and
hedging activities. Statement 133 is effective for fiscal years beginning after
June 15, 2000. Asymetrix does not expect the adoption of Statement 133 to have a
material impact on its consolidated financial statements.

SEGMENT INFORMATION

         Asymetrix has adopted the provisions of Statement of Financial
Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION ("Statement 131"). Statement 131 establishes standards for
the reporting by public business enterprises about operating segments, products
and services, geographic areas, and major customers. The method for determining
what information to report is based on the way that management organizes the
operating segments within Asymetrix for making operating decisions and assessing
financial performance.

         Asymetrix's chief operating decision-maker is considered Asymetrix's
Chief Executive Officer ("CEO"). The CEO reviews financial information on a
consolidated basis with disaggregated information about revenues by product
categories and geographic region for purposes of making operating decisions and
assessing financial performance. The product categories reviewed by the CEO are
on-line learning products and other products. These categories are identical to
those in the accompanying consolidated statements of operations. The
consolidated financial information reviewed by the CEO does not include
information regarding profitability of Asymetrix's different products or
services. Therefore, prior to click2learn.com, Asymetrix operates in a single
operating segment, on-line learning.

         Revenue and long-lived asset information regarding operations in the
United States and International primarily Europe is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      FOR THE THREE MONTHS             FOR THE NINE MONTHS
                                                                        ENDED SEPTEMBER 30,             ENDED SEPTEMBER 30,
                                                                   --------------------------     -----------------------------
                                                                       1999            1998            1999            1998
                                                                   -----------     ----------     ----------        -----------
<S>                                                                <C>             <C>            <C>               <C>
Revenue:

      Domestic                                                       $7,936          $8,421         $20,611           $21,658
      International - primarily Europe                                1,153             707           4,489             4,041
                                                                   -----------     ----------     ----------        -----------
                                                                     $9,089          $9,128         $25,100           $25,699
                                                                   -----------     ----------     ----------        -----------
                                                                   -----------     ----------     ----------        -----------
</TABLE>

<TABLE>
<CAPTION>
                                                                           SEPTEMBER 30,
                                                                    ------------------------
                                                                      1999            1998
                                                                    -------         --------
<S>                                                                 <C>             <C>
Long-lived assets:
       Domestic operations                                          $13,215          $8,979
       International operations - primarily Europe                       73              76
                                                                    -------         --------
                                                                    $13,288          $9,055
                                                                    -------         --------
                                                                    -------         --------
</TABLE>

No single customer accounted for greater than 10% of total revenues in
any period presented.

SUBSEQUENT EVENTS

         On September 30, 1999, Asymetrix entered into a securities purchase
agreement with Marshall Capital Management, Inc. and Vulcan Ventures to
purchase Series A Convertible Stock. Marshall Capital Management, Inc. has
agreed to purchase 6,000 shares for $6 million and Vulcan Ventures has agreed
to purchase 4,000 shares for $4 million. The funds were received on October 6,
1999. These shares converted to an aggregate total 1.29 million shares of
common stock when the S-3 registration statement became effective.

                                       8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ASYMETRIX SHOULD BE READ IN CONJUNCTION WITH ASYMETRIX'S CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE
IN THIS REPORT. THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ASYMETRIX'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN
"FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS."

OVERVIEW

         Asymetrix provides a variety of learning solutions designed to help
organizations more effectively organize, manage, increase and use knowledge as a
competitive advantage. These solutions make up two primary lines of business:
(1) a comprehensive "behind the firewall" enterprise learning solution that
consists of a technology platform and related professional services; and (2)
click2learn.com, an Internet learning portal announced in July 1999 and
providing a single source for both Internet-delivered online learning content
and more traditional forms of learning such as books, video tapes, CD-ROMs, and
instructor-led courses, as well as a means to create and publish online learning
courses.

         Asymetrix's enterprise learning technology platform includes (1)
ToolBook II Instructor and ToolBook II Assistant, which enable customers to
author online learning applications, (2) Librarian and Ingenium, learning
management and skills assessment systems designed to enable customers to deploy
and manage all aspects of their training needs, and (3) a library of learning
content published by third parties. Asymetrix's professional services include
strategic consulting, custom development of learning content, systems
integration and training services to enable organizations to develop, implement
and maintain a learning solution that is tailored to its unique needs.

         Click2learn.com is an Internet learning portal that provides a single
source where organizations or individuals can obtain learning content from a
variety of well-known vendors for online delivery over the Internet or in
tangible formats such as books, videos and CD-ROMs, as well as the ability to
register online for instructor-led training provided by a variety of vendors.
Click2learn.com also includes click2learn.publisher, a free server-based
authoring tool with which users can create their own online learning courses,
publish and distribute them through click2learn.com, and earn royalties on any
purchases of such courses. The click2learn.com site can be customized to include
the look and feel of customers' intranets or of other high-traffic Internet
sites, allowing it to be adopted as the integrated "training channel" for these
sites.

         Click2learn.com will formally launch in the fourth quarter of 1999.
Therefore, no significant revenue from click2learn.com is expected in 1999.
Asymetrix will incur incremental marketing and site development expenses
associated with the learning portal during the remainder of 1999. To reflect the
strategic importance of the click2learn.com learning portal and the planned
integration of its current products and services with click2learn.com, Asymetrix
began doing business as "click2learn.com, inc." in October, 1999, and has begun
the process of amending its Certificate of Incorporation to formally change its
corporate name.

         Since July 1997, Asymetrix has completed ten acquisitions that were
accounted for using the purchase method of accounting, including the acquisition
of Pixelmedia Visual Communications, Inc. ("Pixelmedia"), an online learning
development firm based in Richmond, British Columbia, in July 1999. In
connection with that acquisition, Asymetrix issued 100,000 shares of common
stock and paid approximately $500,000 to acquire all of the issued and
outstanding capital stock of Pixelmedia and to retire debts owed by Pixelmedia
to its principal shareholders.

         Because these acquisitions were accounted for using the purchase method
of accounting, Asymetrix's historical consolidated financial statements do not
include results of operations, financial position or cash flows of these
entities prior to their respective dates of acquisition. In connection with
these ten acquisitions, Asymetrix has recorded an aggregate of approximately
$11.4 million in goodwill, of which approximately $1.5 million will be amortized
on a straight-line basis over a five-year life and approximately $9.7 million
will be amortized over a fifteen-year life. If Asymetrix were to incur
additional charges for acquired in-process research and development


                                       9
<PAGE>

and amortization of goodwill with respect to any future acquisitions,
Asymetrix's business, operating results and financial condition could be
materially and adversely affected.

         In July 1998, Asymetrix acquired Meliora Systems Inc., which was
accounted for under the pooling of interests method. The consolidated financial
statements of Asymetrix have been restated to give effect to the combination as
if the companies had been combined since their inception.

         Asymetrix incurred net losses of $13.7 million in 1997, $5.2 million in
1998 and a net loss of $6.8 million in the nine months ended September 30, 1999,
and has yet to achieve operating income or net income under its online learning
business model. Asymetrix's limited operating history under this business model,
and the emerging nature of the market for online learning among other factors,
make prediction of Asymetrix's future operating results difficult. Although
Asymetrix has experienced revenue growth in certain recent periods, those growth
rates may not be sustainable or indicative of future growth rates and,
therefore, they should not be considered indicative of future operating results.
In addition, Asymetrix intends to continue to invest in various aspects of its
online learning business, and in particular in its click2learn.com learning
portal. As a result, Asymetrix expects to continue to incur operating losses at
least through 1999. Asymetrix may not achieve profitability or, if profitability
is achieved, it may not be sustained.


RESULTS OF OPERATIONS

         The following table presents Asymetrix's results of operations as a
percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
                                                  Three Months                    Nine Months
                                              Ended September 30,             Ended September 30,
                                             ----------------------------    --------------------------
                                                1999               1998          1999            1998
                                             -----------        ---------    -----------      ---------
                                                  %               %                %              %
                                             -----------        ---------    -----------      ---------
<S>                                          <C>                <C>          <C>              <C>
Revenue:
 Product revenue:
   Online learning products                         37               31              37            30
   Other products                                    6               18               5            15
                                             -----------        ---------    -----------      ---------
        Total product revenue                       43               49              42            45
 Services revenue                                   57               51              58            55
                                             -----------        ---------    -----------      ---------
         Total revenue                             100              100             100           100
Cost of revenue:
 Product revenue:
   Online learning products                          3                3               3             3
   Other products                                    3                2               2             3
                                             -----------        ---------    -----------      ---------
         Total cost of product revenue               6                5               5             6
 Services revenue                                   41               36              41            36
                                             -----------        ---------    -----------      ---------
         Total cost of revenue                      47               41              46            42
Gross margin                                        53               59              54            58
Operating expenses:
    Research and development                        21               17              20            18
    Sales and marketing                             42               39              44            41
    General and administrative                      15               15              16            17
   Amortization of goodwill                          3                2               3             2
                                             -----------        ---------    -----------      ---------
         Total operating expenses                   81               73              83            78
                                             -----------        ---------    -----------      ---------
Loss from operations                               -28              -14             -29           -20
Other income(loss), net                              2                3               2             9
                                             -----------        ---------    -----------      ---------
Net loss                                           -26              -11             -27           -11
                                             -----------        ---------    -----------      ---------
</TABLE>


                                       10
<PAGE>

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1998

         REVENUE. Total revenue of $9.1 million was unchanged for the three
months ended September 30, 1998 and 1999. Total revenue decreased 2% from $25.7
million in the nine months ended September 30, 1998 to $25.1 million in the nine
months ended September 30, 1999.

         Online learning product revenue increased 20% from $2.8 million in the
three months ended September 30, 1998 to $3.4 million in the three months ended
September 30, 1999. Online learning product revenue increased 22% from $7.7
million in the nine months ended September 30, 1998 to $9.4 million in the nine
months ended September 30, 1999. The increase in online learning product revenue
was due primarily to increased demand for Asymetrix's online learning products
because of Asymetrix's focus on the online learning market. Other product
revenue decreased 70% from $1.7 million in the three months ended September 30,
1998 to $513 thousand in the three months ended September 30, 1999. Other
product revenue decreased 69% from $4.0 million in the nine months ended
September 30, 1998 to $1.2 million in the nine months ended September 30, 1999.
Other product revenue consists of revenue from Asymetrix's products that are not
targeted at the online learning market, many of which have been discontinued or
divested over the past years. Total product revenue decreased 14% from $4.5
million in the three months ended September 30, 1998 to $3.9 million in the
three months ended September 30, 1999, reflecting the increase in online
learning product revenue. Total product revenue decreased 9% from $11.7 million
in the nine months ended September 30, 1998 to $10.6 million in the nine months
ended September 30, 1999, reflecting the decrease in other product revenue. As a
result of Asymetrix's strategy to focus on the online learning market, Asymetrix
anticipates that future growth in product sales, if any, will be attributable to
its online learning products and that its other product revenue will continue to
decrease in the future.

         Services revenue increased 12% from $4.6 million in the three months
ended September 30, 1998 to $5.2 million in the three months ended September 30,
1999. Services revenue increased 3% from $14.0 million in the nine months ended
September 30, 1998 to $14.5 million in the nine months ended September 30, 1999.

         During the quarter, sales and marketing agreements were signed
separately with Go2Net, Inc. and VerticalNet, Inc. Both firms will use
co-branded, customized version of our click2learn.com learning portal to make
training available to millions of their users. Revenues from content and
advertising sales generated by each of these implementations will be shared
between click2learn.com and each partner. Both implementations are scheduled
to go live during the fourth quarter 1999. These agreements do not include
minimum revenue guarantees to the company therefore, it is uncertain whether
they will contribute to future revenue growth.

         COST OF REVENUE. Cost of product revenue includes costs of media,
manuals and distribution costs. Gross margin from Asymetrix's online learning
products is generally higher than that of its other products because these
products are typically sold by Asymetrix's direct sales force, as compared with
other products sold through indirect channels, such as OEMs and resellers. Cost
of services revenue consists primarily of personnel-related costs in providing
consulting, maintenance and training to customers. Gross margin on product
revenue is higher than gross margin on services revenue, reflecting the lower
materials, packaging and other costs of software compared with the relatively
high personnel costs associated with providing professional services.

         Total cost of revenue increased 14% from $3.7 million in the three
months ended September 30, 1998 to $4.2 million in the three months ended
September 30, 1999. Total cost of revenue increased 8% from $10.8 million in the
nine months ended September 30, 1998 to $11.7 million in the nine months ended
September 30, 1999.

         Cost of online learning products revenue increased 12% from $231,000 in
the three months ended September 30, 1998 to $258,000 in the three months ended
September 30, 1999. Cost of online learning products revenue decreased 7% from
$709,000 in the nine months ended September 30, 1998 to $662,000 in the nine
months ended September 30, 1999. The decrease was due primarily to lower per
unit costs. Cost of other products revenue increased 22% from $208,000 in the
three months ended September 30, 1998 to $254,000 in the three months ended
September 30, 1999. Cost of other products revenue decreased 35% from $785,000
in the nine months ended September 30, 1998 to $512,000 in the nine months ended
September 30, 1999. The decline was due to decreased sales of Asymetrix's other
products. Total cost of product revenue increased 17% from $439,000 in the three
months ended September 30, 1998 to $512,000 in the three months ended September
30, 1999. Total cost of product revenue decreased 21% from $1.5 million in the
nine months ended September 30, 1998 to $1.2 million in the nine months ended
September 30, 1999.

         Total products gross margin decreased from 90% in the three months
ended September 30, 1998 to 87% in the three months ended September 30, 1999.
Total products gross margin increased from 87% in the nine months ended
September 30, 1998 to 89% in the nine months ended September 30, 1999.

         Cost of services revenue increased 14% from $3.3 million in the three
months ended September 30, 1998 to $3.7 million in the three months ended
September 30, 1999. Cost of services revenue increased 13% from $9.3 million in
the nine months ended September 30, 1998 to $10.5 million in the nine months
ended September 30,


                                       11
<PAGE>

1999. The increase was due primarily to increased personnel costs associated
with over capacity throughout most of the nine months.

         Services gross margin decreased from 29% in the three months ended
September 30, 1998 to 28% in the three months ended September 30, 1999. Services
gross margin decreased from 34% in the nine months ended September 30, 1998 to
28% in the nine months ended September 30, 1999. Asymetrix anticipates that cost
of services revenue will increase in absolute dollars if it adds additional
professional services personnel. To the extent services revenue increases
relative to product sales revenue as a percentage of total revenue, overall
gross margins would decline.

OPERATING EXPENSES

         RESEARCH AND DEVELOPMENT. Research and development expenses include
expenses associated with the development of new products and new product
versions and consist primarily of salaries, depreciation of development
equipment, supplies and overhead allocations. Research and development expenses
increased 20% from $1.6 million in the three months ended September 30, 1998 to
$1.9 million the three months ended September 30, 1999. Research and development
expenses as a percentage of total revenue increased from 17% in the three months
ended September 30, 1998 to 21% in the three months ended September 30, 1999.
Research and development expenses as a percentage of total revenue increased
from 18% in the nine months ended September 30, 1998 to 20% in the nine months
ended September 30, 1999. The increase was attributable to incremental expenses
associated with the click2learn.com learning portal initiative. Asymetrix
expects research and development expenses to increase in absolute dollars in the
future.

         SALES AND MARKETING. Sales and marketing expenses consist primarily of
sales and marketing personnel costs, including sales commissions, travel,
advertising, public relations, seminars, trade shows and other marketing
literature and overhead allocations. Sales and marketing expenses increased 9%
from $3.6 million in the three months ended September 30, 1998 and $3.9 million
in the three months ended September 30,1999. Sales and marketing expenses as a
percentage of total revenue increased from 39% in the three months ended
September 30, 1998 to 43% in the three months ended September 30, 1999. Sales
and marketing expenses as a percentage of total revenue increased from 41% in
the nine months ended September 30, 1998 to 44% in the nine months ended
September 30, 1999. The increase in sales and marketing expense was attributable
to increases in the size of Asymetrix's direct selling organization. Asymetrix
expects that sales and marketing expenses will increase in absolute dollars in
the future, as Asymetrix continues to increase its sales and marketing efforts
in the online learning market.

         GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other personnel-related expenses for Asymetrix's
administrative, executive and finance personnel as well as outside legal and
audit costs. General and administrative expenses were unchanged at $1.4 million
for the three months ended September 30, 1998 and for the three months ended
September 30, 1999. General and administrative expenses decreased 7% from $4.3
million for the nine months ended September 30, 1998 to $4.0 million for the
nine months ended September 30, 1999. General and administrative expenses as a
percentage of total revenue was unchanged at 15% for the three months ended
September 30, 1998 compared to the three months ended September 30, 1999.
General and administrative expenses as a percentage of total revenue decreased
from 17% to 16% in the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1999. Asymetrix expects that general and
administrative expenses will increase in absolute dollars in the future as
Asymetrix incurs additional costs (including directors' and officers' liability
insurance, investor relations programs and increased professional fees) related
to being a public company.

AMORTIZATION OF GOODWILL

         Amortization of goodwill expense relates to the amortization of excess
purchase price over net assets from acquired companies recorded under the
purchase method of accounting. For the three months ended September 30, 1998,
Asymetrix recognized $213,000 of amortization of goodwill and for the three
months ended September 30, 1999, recognized $239,000 of amortization of
goodwill. For the nine months ended September 30, 1998, Asymetrix recognized
$592,000 of amortization of goodwill and for the nine months ended September 30,
1999, recognized $678,000 of amortization of goodwill. The acquisition of
Pixelmedia in July of 1999 is expected to generate approximately $15,000 of
additional amortization of goodwill expense per quarter for the next 15 years.


                                       12
<PAGE>

OTHER INCOME
         Asymetrix recorded no other expense in the three months ended September
30, 1998 and in the three months ended September 30, 1999. Asymetrix recorded no
other expense in the nine months ended September 30, 1998 and in the nine months
ended September 30, 1999. Other interest income, net was $281,000 in the three
months ended September 30, 1998 and $137 thousand in the three months ended
September 30, 1999. Other interest income, net was $280,000 in the nine months
ended September 30, 1998 and $577,000 in the nine months ended September 30,
1999. The increase was due to interest earned on Asymetrix's higher cash and
cash equivalents balance as a result of its initial public offering. Equity in
income (losses) from Infomodelers was $2.2 million in the nine months ended
September 30, 1998, representing Asymetrix's equity in the net income (losses)
from Infomodelers in such periods and $0 in the nine months ended September 30,
1999. Equity in income (losses) from Infomodelers in 1998 resulted from the sale
by Infomodelers of substantially all of its assets to Visio Corporation.

LIQUIDITY AND CAPITAL RESOURCES

         At September 30, 1999, Asymetrix had cash and cash equivalents totaling
$14.1 million, a decrease of $7.6 million from December 31, 1998. The net
decrease in cash and cash equivalents was due primarily to $8.9 million used
in operating activities, $2.0 million used in investing activities, and $3.4
million provided by financing activities. At September 30, 1999, the principal
source of liquidity for Asymetrix was $20.8 million in working capital.

         Asymetrix anticipates that its cash and cash equivalents will be
sufficient to meet its working capital needs and capital expenditures for at
least the next 12 months. Asymetrix's long-term liquidity will be affected by
numerous factors, including acquisitions of businesses or technologies, demand
for Asymetrix's online learning products and services, the extent to which such
online learning products and services achieve market acceptance, the timing of
and extent to which Asymetrix invests in new technology, the expenses of sales
and marketing and new product development, the extent to which competitors are
successful in developing their own products and services and increasing their
own market share, the level and timing of revenues, and other factors. In
addition, Asymetrix from time to time evaluates potential acquisitions of
businesses, products or technologies that complement Asymetrix's business. To
the extent that resources are insufficient to fund Asymetrix's activities,
Asymetrix may need to raise additional funds. There can be no assurance that
such additional funding, if needed, will be available on terms attractive to
Asymetrix, or at all. If adequate funds are not available on acceptable terms,
Asymetrix may be unable to expand its business, develop or enhance its products
and services, take advantage of future opportunities or respond to competitive
pressures, any of which could have a material adverse effect on Asymetrix's
business, operating results and financial condition.

YEAR 2000 COMPLIANCE

         Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. These date code fields
will need to distinguish 21st century dates from 20th century dates and, as a
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such "year 2000" requirements.

         Asymetrix has designed and tested the most current versions of its
products to be year 2000 compliant. However, some of Asymetrix's customers may
be using older versions of its products that are not year 2000 compliant.
Asymetrix has been encouraging its customers to upgrade to current product
versions, and Asymetrix has been required by certain of its customers to warrant
that the current versions of its products and custom development applications
are year 2000 compliant. Although Asymetrix believes the current versions of its
products are year 2000 compliant, the current product versions may contain
undetected errors or defects associated with year 2000 date functions. These
undetected date functions may result in material costs to Asymetrix, as well as
claims against Asymetrix for breach of its warranties of year 2000 compliance.
Furthermore, although Asymetrix has not made any express representations or
warranties with respect to year 2000 compliance of older versions of its
products and has included clauses disclaiming any implied warranties and
limiting its liability for product defects in the agreements under which those
older versions were licensed to customers, Asymetrix may still face claims or
litigation based on older versions of its products. Asymetrix is aware of a
growing number of lawsuits against other software vendors related to year 2000
compliance, including lawsuits based on those


                                       13
<PAGE>

companies charging their customers for new versions of their products that are
year 2000 compliant rather than providing such versions for free. Because of the
unprecedented nature of such litigation, Asymetrix is uncertain of the extent to
which it may be affected. If Asymetrix is affected by such litigation, it could
have a material adverse effect on Asymetrix's business, operating results and
financial condition. Asymetrix is not currently a party to any such litigation.

         With respect to Asymetrix's internal information technology systems,
Asymetrix's year 2000 internal readiness program primarily covers the following
activities: (1) taking inventory of hardware and software systems, (2)
determining those systems' level of year 2000 compliance, (3) assessing the
business and customer satisfaction risks associated with those systems, (4)
creating action plans to address known risks, (5) executing and monitoring its
action plans, and (6) contingency planning.

         At this time Asymetrix has substantially completed its review of both
its mission critical information technology systems (including finance, order
processing, customer service, project management, and sales management) and its
second tier information technology systems (including its network servers,
network software and widely used software applications), and believes that those
systems are substantially year 2000 compliant. Asymetrix expects to continue
final implementation and testing of year 2000 compliance activities throughout
calendar 1999. Asymetrix has no current plans to perform an assessment of
imbedded technology outside of its information technology systems, and believes
that the failure of any such imbedded technology to be year 2000 compliant will
not have a material effect on Asymetrix's business. Asymetrix has no current
plan to retain any outside consultants to assist in its year 2000 compliance
activities.

         Asymetrix will not send detailed questionnaires to vendors and service
providers to certify year 2000 readiness, but Asymetrix has obtained or relied
upon published assurances of year 2000 compliance in relation to purchases of
new information technology systems and Asymetrix has conducted its own internal
year 2000 analysis of its vendors and service providers. While Asymetrix has not
broadly surveyed its vendors and service providers for year 2000 compliance,
Asymetrix has reviewed publicly available information related the year 2000
compliance status of its material vendors to help determine their level of year
2000 compliance. Asymetrix does not rely on products and services provided by
any single vendor in the conduct of its business, and believes that even if the
ability of one of its suppliers to provide goods or services was negatively
impacted by a year 2000 problem, alternative sources would be available to
supply such goods and services on commercially reasonable terms.

         Asymetrix will not send questionnaires to its customers to
independently verify its customers' level of year 2000 compliance. However, most
of Asymetrix's significant customers are large business enterprises and
government agencies which Asymetrix believes are devoting significant resources
to ensuring their own internal year 2000 compliance. Asymetrix has received and
responded to a large number of detailed year 2000 questionnaires from its
customers as a part of their own year 2000 compliance programs, and many of
Asymetrix's customers are required to file reports with the SEC disclosing their
own year 2000 readiness. Although Asymetrix anticipates that its significant
customers will be year 2000 compliant, Asymetrix believes that its customers' or
potential customers' year 2000 compliance efforts have affected their purchasing
patterns as these companies or agencies expend significant resources and focus
personnel on ensuring their own internal year 2000 compliance. Devoting
resources and personnel to year 2000 compliance may result in reduced funds
available to purchase other products or services and may delay the
implementation of new information technology systems such as those offered by
Asymetrix, either of which could have a material adverse effect on Asymetrix's
business, operating results and financial condition.

         The software, systems and content used in connection with the
click2learn.com learning portal were acquired or developed during 1999 with
particular attention to year 2000 compliance. All software and systems used
in connection with the click2learn.com learning portal and maintained at
Asymetrix have been tested for year 2000 compliance. Asymetrix has also
received contractual warranties of year 2000 compliance from the providers of
key components or services used in connection with click2learn, as well as
from the providers of content distributed through click2learn.com.

         Asymetrix estimates that the total cost of evaluating and addressing
its year 2000 issues will be approximately $100,000. Asymetrix has spent $9,500
and $19,000 in the three and nine months ending September 30, 1999 and to date,
$66,500 in connection with evaluating and addressing year 2000 issues. Such
expenditures represented 6% of Asymetrix's total information technology budget.
All funds used for evaluating and addressing year 2000 issues are from
Asymetrix's information technology budget and no additional budget dollars were
allocated specifically to address year 2000 compliance. Therefore, resources
devoted to year 2000 compliance are not available for other information
technology systems or projects.

         Although Asymetrix does not believe that it will incur any material
costs or experience material disruptions in its business associated with
preparing its internal systems for the year 2000, Asymetrix may experience
serious unanticipated negative consequences and material costs caused by
undetected errors or defects



                                       14
<PAGE>

in the technology used in its internal systems, which are composed of third
party software, third party hardware and internally developed software, or in
the internal systems of its vendors or customers. The most reasonably likely
worst case scenarios would include: (1) loss or corruption of data contained in
Asymetrix's internal information systems, (2) hardware failure, (3) the failure
of infrastructure services provided by government agencies and other third
parties (e.g., electricity, phone service, water transport, internet services,
etc.); and (4) the failure of the internal systems of Asymetrix's vendors or
customers, resulting in problems with providing services or making payments to
Asymetrix. Asymetrix is undertaking contingency planning at this time and
expects its contingency plans to include, among other things, manual
work-arounds for software and hardware failures, as well as substitution of
systems or vendors, if necessary.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

         ASYMETRIX HAS A LIMITED OPERATING HISTORY IN ITS CURRENT MARKETS. Until
early 1995, Asymetrix was engaged in various research and development activities
and in developing and marketing multimedia authoring products, database and
Internet tools, web publishing products and other ancillary products, most of
which Asymetrix does not currently sell. Starting in 1995, Asymetrix began to
focus its development and marketing efforts on products and services for the
enterprise learning market. Asymetrix announced its click2learn.com web site in
July 1999, and has not previously hosted, operated and managed an e-commerce web
site. Accordingly, Asymetrix has a limited operating history on which to
evaluate its current business and prospects.

         Risks Asymetrix faces under its new business models include, but are
not limited to, the demand for technology-based training and online learning
applications, demand for online learning products and services, broad and timely
acceptance of the click2learn.com web site, competition and those other risks
described in this section. To address these risks, Asymetrix must, among other
things:

         -        successfully introduce and build the click2learn.com web site;
         -        attract user traffic and establish relationships with
                  corporate customers and generate revenues from such customers;
         -        continue to establish relationships with leading providers of
                  learning content to sell content over the click2learn web
                  site;
         -        continue to establish relationships with high-traffic Internet
                  sites and corporate customers for the use of click2learn.com
                  as the "learning channel" for their web sites;
         -        respond to competitive developments;
         -        attract, integrate, retain and motivate qualified personnel;
         -        successfully introduce new products and services; and
         -        address and establish new technologies and technology
                  standards.

         Although Asymetrix intends to derive revenue from the click2learn.com
web site, the pricing, expense and revenue model for this site has not been
broadly tested in the marketplace. If the pricing, expense and revenue model is
not acceptable to users, customers, content providers or advertisers, the
click2learn.com web site may not be commercially successful. This would
seriously harm Asymetrix's business, particularly if it experiences a decline in
the growth of revenues from its enterprise learning products and services.

         ASYMETRIX'S OPERATING RESULTS COULD VARY SIGNIFICANTLY FROM QUARTER TO
QUARTER. Asymetrix's quarterly operating results have varied significantly in
the past and are expected to fluctuate significantly in the future as a result
of a variety of factors, many of which are outside Asymetrix's control. Factors
that may adversely affect Asymetrix's quarterly operating results include:

         -        the demand for technology-based training and demand for online
                  learning solutions;
         -        the size and timing of product orders and the timing and
                  execution of professional services engagements;
         -        the mix of revenue from products and services;
         -        the mix of products sold;
         -        the ability to meet client project milestones;
         -        market acceptance of Asymetrix's or its competitors' products
                  and services;
         -        Asymetrix's ability to develop and market new or enhanced
                  products, and services in a timely manner and the market
                  acceptance of these products and services;


                                       15
<PAGE>

         -        timing of revenues and expenses relating to click2learn.com;
                  and
         -        the timing of revenue recognition.

         Asymetrix's future revenues are difficult to predict and Asymetrix may
not be able to adjust spending in response to revenue shortfalls. Asymetrix's
limited operating history under its current business model, including
click2learn.com, possible acquisitions and the emerging nature of the market
make prediction of future revenue and expenses difficult. Expense levels are
based, in part, on expectations as to future revenue and to a large extent
are fixed in the short term. If Asymetrix is not able to predict future
revenue accurately, it may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall.

         ASYMETRIX IS IN A DEVELOPING MARKET. Corporate training and education
has historically been conducted primarily through classroom instruction and has
traditionally been performed by a company's internal personnel. Many companies
have invested heavily in their current training solutions. Although
technology-based training applications have been available for several years,
they currently account for only a small portion of the overall training market.

         Accordingly, the future success of Asymetrix will depend upon, among
other factors, the extent to which companies adopt technology-based solutions
and use the Internet in connection with their training activities, and the
extent to which companies utilize the services or purchase products of
third-party providers. Many companies that have already invested substantial
resources in traditional methods of corporate training may be reluctant to adopt
a new strategy that may limit or compete with their existing investments. Even
if companies implement technology-based training or online learning solutions,
they may still choose to design, develop, deliver or manage all or a part of
their education and training internally. If technology-based learning and the
use of the Internet for learning do not become widespread, or if companies do
not use the products and services of third parties to develop, deliver or manage
their training needs, then Asymetrix's products and services, including our
click2learn.com web site, may not achieve commercial success.

         COMPETITION. The online learning market is highly fragmented and
competitive, rapidly evolving and subject to rapid technological change, with no
single competitor accounting for a dominant market share. Because of the lack of
significant barriers to entry in its market, Asymetrix expects that new
competitors will enter this market in the future. Asymetrix's competitors vary
in size and scope and the breadth of products and services offered. Asymetrix
faces competition from:

         -        developers of multimedia authoring tools with respect to its
                  authoring and authoring support products,
         -        sellers of off-the-shelf technology-based training courses
                  that sell management systems with their titles with respect to
                  its learning management systems,
         -        many small, regional online learning and technology-based
                  training services businesses,
         -        other web sites focused on learning and education, such as
                  learn2.com, headlight.com, fatbrain.com and smartforce.com,
                  with respect to click2learn.com, as well developers or
                  resellers of training content who make their content available
                  over the Internet; and
         -        large professional consulting firms and in-house training
                  departments, with respect to all aspects of its enterprise
                  learning solutions.

         Several of Asymetrix's current and potential competitors have longer
operating histories and significantly greater financial, technical, marketing
and other resources and therefore may be able to respond more quickly to new or
changing opportunities, technologies, standards and customer requirements. Many
of these competitors also have broader and more established distribution
channels that may be used to establish strategic alliances or deliver competing
products or services directly to customers. If these competitors were to bundle
competing products or services for their customers, the demand for Asymetrix's
products and services might be substantially reduced and its ability to market
and sell products and services successfully may be substantially diminished. In
addition, the existence or announcement of strategic relationships involving
Asymetrix's competitors could adversely affect its ability to attract and retain
customers.

         DEPENDENCE ON THIRD PARTY RELATIONSHIPS. Asymetrix must pursue
distribution relationships with high-traffic web sites in an effort to attract
traffic to private-labeled areas of the click2learn.com web site, as well as to
the click2learn.com branded areas. There is intense competition for placements
on these sites, and Asymetrix may


                                       16
<PAGE>

not be able to enter into these relationships on commercially reasonable
terms, or at all. Even if Asymetrix enters into distribution relationships
with these web sites, they themselves may not attract significant numbers of
users. Therefore, Asymetrix may not receive additional users from these
relationships. Moreover, Asymetrix may have to pay significant fees to
establish these relationships or issue securities to companies that operate
these web sites, even if click2learn.com does not receive additional users as
a result.

         Asymetrix uses licensed third party technology in its products and in
the click2learn.com web site and it licenses content from third parties for the
click2learn.com web site. Asymetrix may not be able to continue to license
technology or content from third parties. Future licenses to this technology and
content may not be available to Asymetrix on commercially reasonable terms or at
all. The loss of or inability to obtain or maintain any of these technology or
content licenses could result in delays in introduction of new products or could
force Asymetrix to discontinue permitting access to portions of the
click2learn.com web site until equivalent technology or content, if available,
is identified, licensed and integrated. Furthermore, Asymetrix may be subjected
to legal claims related to licensed technology or content based on defamation,
negligence, product liability, infringement of intellectual property or other
legal theories.

         CUSTOMER REQUIREMENTS AND FIXED PRICE ENGAGEMENTS. Asymetrix could face
liability from customers if it does not meet their expectations. Many of
Asymetrix's professional services engagements require it to develop learning
applications to suit unique customer requirements. The failure or inability to
meet a customer's expectations or requirements in the performance of services
could injure Asymetrix's business reputation or result in a claim for damages,
regardless of Asymetrix's responsibility for the failure. Asymetrix attempts to
limit contractually its liability for damages arising from product defects,
negligent acts, errors, mistakes or omissions in rendering professional
services, however, these contractual protections are not always obtained and may
not be enforced or otherwise protect Asymetrix from liability for damages.
Asymetrix's insurance may not be sufficient to cover one or more claims.

         Many professional services projects are performed on a fixed-price
basis rather than on a time and materials basis. If Asymetrix does not
accurately predict the costs of these projects, it could incur unexpected costs.
If Asymetrix does not complete fixed-price engagements within budget, on time
and to clients' satisfaction, Asymetrix would bear the risk of cost overruns.

         KEY PERSONNEL. Asymetrix's future success depends on the performance of
senior management team and other key employees, and on its ability to attract,
integrate, motivate and retain additional highly skilled technical, sales and
marketing, and professional services personnel. There is intense competition for
these personnel. Asymetrix does not have employment agreements with most of its
executives or other key employees. In addition, Asymetrix does not maintain key
person life insurance for any officers or key employees.

         INTELLECTUAL PROPERTY. Despite Asymetrix's precautions, it may be
possible for a third party to copy or otherwise obtain and use its intellectual
property or trade secrets without authorization. In addition, others could
independently develop substantially equivalent intellectual property. Litigation
may be necessary in the future to enforce Asymetrix's intellectual property
rights, to protect trade secrets or to determine the validity and scope of the
proprietary rights of others. This litigation could result in substantial costs
and diversion of management and technical resources.

         From time to time Asymetrix has received, and may in the future
receive, notice of claims of infringement of other parties' proprietary rights.
Infringement or other claims could be asserted or prosecuted against Asymetrix
in the future. Any such claims, with or without merit, could be time-consuming,
and result in costly litigation and diversion of technical and management
personnel. They could also cause product shipment delays or require Asymetrix to
develop non-infringing technology or enter into royalty or licensing agreements.
These royalty or licensing agreements, if required, may not be available on
reasonable terms, or at all.

         GENERAL ECONOMIC CONDITIONS. Asymetrix's revenues are subject to
fluctuation as a result of general economic conditions. A significant portion of
Asymetrix's revenues are derived from the sale of products and services to
Fortune 1000 companies or government agencies, which historically have adjusted
their expenditures for education and training during economic downturns. Should
the economy weaken in any future period, these organizations may not increase or
may reduce their expenditures on education and training, which could have an
adverse effect on Asymetrix's business


                                       17
<PAGE>

         STOCK PRICE VOLATILITY. The market price of Asymetrix common stock has
been highly volatile since its initial public offering. The stock market in
general, and the stock prices of technology companies in particular, has
experienced significant price and volume fluctuations. Factors that may have an
impact on the price of our stock include:


         -        fluctuations in our operating results;
         -        announcements of technological innovations or new products or
                  services by us or our competitors;
         -        analysts' reports and projections; and
         -        general market conditions.

         In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. This type of litigation could result in
substantial costs and a diversion of management's attention and resources.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Asymetrix holds its assets primarily in cash and cash equivalents,
such as short-term marketable debt securities, money market funds and other cash
equivalents. Asymetrix minimizes its risk by investing in financial instruments
with a maturity of three months or less. Asymetrix does not use derivative
financial instruments.


                                       18
<PAGE>

PART II-OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         PROEDUCATION INTERNATIONAL, INC. V. ASYMETRIX CORP. ET AL, cause no.
1999-32584 District Court, 125th Judicial District, Harris County, Texas. This
lawsuit was filed in July 1999 and alleges that Asymetrix conspired with several
other named defendants to misappropriate certain intellectual property of the
plaintiff and engaged in other tortuous activities to the detriment of the
plaintiff. Asymetrix has undertaken an investigation of the allegations in the
suit and believes that they are without merit. Asymetrix intends to conduct a
vigorous defense of the suit and to seek to have the suit dismissed as soon
as possible.


ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

         On July 1, 1999 the Company issued 100,000 shares of common stock and
paid approximately $500,000 to acquire all of the issued and outstanding capital
stock of Pixelmedia Visual Communications, Inc. ("Pixelmedia") and to repay
debts owed by Pixelmedia to its principal stockholders. The shares were
issued to two individual shareholders of Pixelmedia as partial consideration for
such shareholders' capital stock in Pixelmedia. The issuance of common stock was
a private placement in an offshore transaction pursuant to Regulation S,
as amended (the "Act"), in that the shares were issued to two individuals who
certified to Asymetrix that they are not U.S. persons and were not acquiring
the shares for the account or benefit of any U.S. persons and who agreed to
resell such shares only in accordance with the provisions of Regulation S or
pursuant to a registration statement or exemption from registration, and the
certificates representing the shares bear restrictive legends to that effect.

         On August 18, 1999 Asymetrix sold 428,571 shares of common stock to
Go2Net, Inc. for an aggregate purchase price of $3,000,000 in cash, and issued
Go2Net, Inc. warrants for the purchase of an additional 428,571 shares of common
stock at an exercise price of $7.00 per share. The sale of shares and warrants
was made pursuant to Rule 506 of Regulation D and/or Section 4(2) under the
Securities Act of 1933 as amended ("the Act") and was therefore exempt under
Section 4(2) of the Act. The shares and warrants were sold to a single
accredited investor, there was no general solicitation or advertising in
connection with the sale of the shares and warrants, and Asymetrix exercised
reasonable care to assure that the purchaser was not an underwriter with the
meaning of Section 2(11) of the Act. The proceeds will be used for working
capital requirements.

         The warrants are exercisable at any time prior to 5:00 p.m. Pacific
time on August 18, 2004 in whole or in part upon the payment of the exercise
price for the number of shares with respect to which the warrants are being
exercised. In addition, the warrants may be exercised on a net exercise base,
pursuant to which the exercise price for an exercise of warrants is paid by the
cancellation of a portion of the shares being exercised having a fair market
value equal to the exercise price for all the shares being exercised. However, a
net exercise may only be made if there is not an effective registration
statement in place on the date of such exercise covering the resale of the
warrant shares. A registration statement on Form S-3 is currently effective for
the resale of the shares of common stock purchased by Go2Net and issuable upon
exercise of the warrants.

         In connection with Asymetrix's initial public offering, it registered
for public sale 3,000,000 shares of common stock, all of which were sold by
Asymetrix. The Securities and Exchange Commission, as amended, declared the
Registration Statement on Form S-1 (Registration No. 333-49037), effective on
June 11, 1998. NationsBanc Montgomery Securities LLC was the managing
underwriter of the IPO. The IPO commenced on June 12, 1998, and terminated
following the sale of all of the securities registered under the Registration
Statement, plus an additional 25,000 shares pursuant to the exercise of the
underwriters' over-allotment option. The common stock was offered and sold to
the public at $11.00 per share, for aggregate consideration of $33,275,000, of
which Asymetrix received net proceeds of $29,331,000.

         From the effective date of the Registration Statement through September
30, 1999, Asymetrix has incurred an estimated $3,944,000 in expenses in
connection with the issuance and distribution of the common stock, including
underwriting discounts and commissions of $2,329,250 and other expenses of
$1,614,750. No finders' fees or expenses were paid to or for the underwriters.
None of these payments were made, directly or


                                       19
<PAGE>

indirectly, to: (1) directors or officers of Asymetrix, or their associates; (2)
persons owning ten percent or more of any class of equity securities of
Asymetrix; or (3) affiliates of Asymetrix.

         From the effective date of the Registration Statement through September
30, 1999, Asymetrix has applied approximately $18 million of the offering
proceeds to working capital requirements. None of these payments were made,
directly or indirectly, to: (1) directors or officers of Asymetrix, or their
associates; (2) persons owning ten percent or more of any class of equity
securities of Asymetrix; or (3) affiliates of Asymetrix. To date, Asymetrix
believes that it has used the offering proceeds in a manner consistent with the
use of proceeds described in the Registration Statement. The remaining offering
proceeds is invested in short-term marketable debt securities, money market
funds and other cash equivalents.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         Not applicable.

ITEM 5.  OTHER INFORMATION.

         Asymetrix intends to hold a stockholder meeting on November 23, 1999
to approve an amendment of its Certificate of Incorporation to change its
name to click2learn.com, Inc.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

                  2        Share Purchase Agreement dated July 1, 1999 by and
                           among Asymetrix and the shareholders of Pixelmedia
                           Visual Communications, Inc.

                  10-1     Securities Purchase Agreement dated August 18, 1999
                           by and between Asymetrix and Go2Net Inc.*

                  10-2     Common Stock Purchase Warrant dated August 18, 1999
                           issued to Go2Net, Inc.*

                  27       Financial Data Schedule

* These exhibits are incorporated herein by reference to Asymetrix's
Registration Statement on Form S-3 (Registration no. 333-87425)

         (b)      Reports on Form 8-K.

                  No reports on Form 8-K were filed during the three months
ended September 30, 1999.


                                       20
<PAGE>

SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                ASYMETRIX LEARNING SYSTEMS, INC.


  November 15, 1999                       /s/ John D. Atherly
----------------------------    -----------------------------------------------
         Date                               John D. Atherly
                                  Vice President, Finance and Administration
                                      and Chief Financial Officer
                                (Duly Authorized Officer and Chief Accounting
                                                  Officer)


                                       21
<PAGE>

                                  EXHIBIT INDEX


                  2        Share Purchase Agreement dated July 1, 1999 by and
                           among Asymetrix and the shareholders of Pixelmedia
                           Visual Communications, Inc.

                  27       Financial Data Schedule


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